Israeli Prime Minster Benjamin Netanyahu gave the go-ahead Wednesday for the immediate construction of 300 housing units in the West Bank and plans for 500 more in East Jerusalem, angering the United States and European Union.

Netanyahu authorized the construction in the Beit El settlement after Israel's Supreme Court refused to overturn an earlier order to demolish two unfinished apartment houses built on the settlement illegally by right-wing Jews.

The prime minister said he opposed tearing down the apartments, but that the law must be obeyed.

Israeli police clashed with settlers Tuesday and Wednesday, using water cannons to drive them out of the buildings before bulldozers moved in.

Meanwhile, the U.S. State Department said it was "deeply concerned" about Israel's decision to proceed with more settlements in the West Bank and East Jerusalem.

"The United States continues to view settlements as illegitimate," spokesman Mark Toner said Wednesday. "Settlement expansion threatens the two-state solution and calls into question Israel's commitment to a negotiated resolution to the conflict."

The EU issued a similar statement, and a spokesman for U.N. Secretary-General Ban Ki-moon called the settlements illegal under international law.

The Palestinians want East Jerusalem as the capital of a future state in the West Bank.

Palestinian officials have called Jewish settlement construction a major impediment to a peace deal.

Israel says the settlements are legal and essential for the country's self-defense.